U.S. chemical production levels have been on the rise so far this year. In Q1, about half of companies reported increased production. Coming off of that strong performance, 89% of companies said that production was either stable or rising compared to the previous quarter. Overall, chemical manufacturers expect further gains in production levels over the coming 6 months, reports American Chemistry Council (ACC).

Chemical manufacturers reported strengthening domestic demand as new orders picked up in Q2. The volume of foreign orders declined, however. Companies expect continued acceleration in the volume of new orders over the coming six months, with gains in foreign orders outpacing growth in domestic orders.

The volume of order backlogs index flattened over Q1 and declined in Q2. Most chemical manufacturers (68%) reported volume of order backlogs remained “about the same” over Q2. Six months from now, 95% of chemical manufacturers expect the volume of order backlogs to be “about the same” or lower.

Raw materials inventory levels accumulated over Q2. This follows five straight quarters (all quarters the survey has been conducted) of declines. Raw material levels are expected to have declined by Q4. Similarly, more than half of chemical manufacturers (76%) reported finished goods inventory levels were stable over Q2. The reading for finished goods inventory levels has been positive for two straight quarters following three quarterly readings indicating manufacturers were destocking. Overall, manufacturers expect no further destocking in the coming six months. The outlook reading was flat for Q3-Q4 expectations.

A key metric for supply chain and inventory management, the supplier delivery times index increased to a positive reading in Q1 and was positive again in Q2. Supplier delivery times had declined over 2023, a reflection of economic weakness and easing supply chain pressures.

Chemical manufacturers do not see a significant worsening or change to what they are dealing with currently. The outlook reading for supplier delivery times was 2.7, reflecting 92% of companies expecting no major change.

Chemical manufacturers’ production costs increased in Q2. Labor costs continued to increase and 43% of companies reported gains. Following rising costs in Q1, transportation costs continued to build in Q2. Despite decreases in each quarter of 2023, chemical manufacturers reported an uptick input/raw material costs over Q1 2024 and continued gains through Q2.

Looking ahead six months, chemical manufacturers anticipate facing increased production costs. Employment levels rose in Q2 for the second quarter in a row. While 78% of companies reported levels held steady through Q2, 14% expanded employment levels and 8% reported declines.

Chemical manufacturers expect to increase employment levels over the coming six months.